Mortgage Market Changes May Come in 2013
Luckily, one of the few issues that both parties in Congress agree on is that the national mortgage market needs to be privately funded, with far less Federal involvement than the 90% rate of government-backed new mortgages that the U.S. has averaged since 2008. As usual, the parties have different views on how to achieve this mutual goal.
For the past few years the Government's heavy-handed involvement in the mortgage market has been necessary to prop up a critical sector of the economy that was in complete free-fall since the Mortgage Crisis. With the economy now stabilizing, expect the Federal Government to start pulling out of the mortgage industry in 2013.
Finally, buyers are starting to peek out of their caves and test the market, intrigued by the record-low interest rates and home prices at 26% below their 2006 peak. So, many politicians are calling for Congress to start pushing Fannie Mae and Freddie Mac out of the nest in order to start dissolving the ties of the artificially created Government-Mortgage market complex that has been created in the wake of the 2008 crisis.
Critics also wonder out loud about how much authority the young Federal Housing Finance Agency should really have. Acting Director Ed DeMarco, a career bureaucrat, was supposed to be a temporary placeholder when he took the job in 2009, and despite the fact that he is not an elected official, he oversees 60% of all U.S. home loans.
President Barack Obama has, in fact, nominated his choice for DeMarco's successor: North Carolina Representative Mel Watt. Watt is a Democrat with over 20 years of experience on Capitol Hill, and has been a key player on the House Financial Services Committee and House Judiciary Committee. His nomination is expected to be contested by Republicans, possibly throwing a wrench in the bipartisan cooperation that will be necessary to pass real mortgage reform.
Still, the greater economy and the mortgage market are perpetually tied together, to kickstart one you need the other, and it's hard to argue that its been a sluggish mortgage market that has hampered economic growth over the last couple years. If Congress can find ways to spark the private mortgage market, expect the rest of the U.S. economy to really start making strides.
By: Javi Calderon
